View more on these topics

Pension industry rallies against £500bn EU edict

The Government and the pension industry have united against proposals in a European Commission green paper to impose insurance-style Solv-ency II requirements on pension schemes across the EU.

The consultation document, published in July, aimed to launch a public debate on how to ensure “adequate, sustainable and safe” pensions across the EU. However, the proposals, which include an increase in capital requirements and possible pan-European regulation of pension funds, could have far-reaching implications for the UK.

Currently, the institute for occupational retirement provision directive creates the framework for the prudential regulation of occupational pension schemes that operate on a fun-ded basis. However, the green paper indicates that a new Solvency II approach could be “a good starting point” in protecting acquired pension rights in the future.

It also suggests that “a common platform” for regulation at an EU level could contribute to maintaining “adequate, sustainable and safe” pensions, potentially stripping away some or all of The Pensions Regulator’s powers in the UK.

It adds: “The commission is therefore keen to explore how this can best be achieved in support of the EU’s wider economic and social objectives.”

Association of Consulting Actuaries chairman Stuart Sou-thall warns that any attempt by the European Commission to impose greater solvency restrictions and seize control of UK regulation risks disturbing the checks and balances of the nation’s pension system.

He says: “The EU green paper itself notes that regulation should be proportionate and not push employers into insolvency or into abandoning pension schemes. The UK has a sophisticated regulatory regime that has been built over a number of years to suit the shape and style of provision here. Many hard-pressed employers providing quality schemes would see such intervention as the final straw.”

The Confederation of British Industry, which has led resistance to the proposals in Brussels, claims the solvency proposals could cost UK businesses £500bn. The National Association of Pension Funds signed a letter alongside the CBI, warning of the dangers of a solvency approach.

Chief executive Joanne Segars, who has also been lobbying EU officials on behalf of the ind-ustry, says: “If Solvency II requirements were to be applied in the UK, it would be very, very damaging indeed. The UK pension system already provides strong member protection through the employer covenant, the work of The Pensions Regulator and the safety net provided by the Pension Protection Fund.

“Additional solvency requirements on UK schemes would work against the commission’s objective of promoting adequacy of pension provision and could lead to the further closure of defined-benefit schemes.”

Pension lawyer Sacker & Partners argues that the EU proposals fail to take account of existing protections for UK scheme members.

Associate Georgina Beechinor says: “Already, across Europe, there are strict funding requirements for occupational schemes and in the UK, The Pensions Regulator has powers to require additional support for schemes, employers leaving or winding-up a scheme must fund the scheme to buyout level.

“We can only hope that the commission takes notice of the overwhelming tide of objection to this proposal and abandons its plans for solvency standards for pension schemes.”

Following the groundswell of industry feeling against the plans, pensions minister Steve Webb issued a statement rejecting the need for EU-wide solvency and regulatory measures.

Issuing the DWP’s response to the consultation, which closed on November 15, Webb said: “It is important that we have a considered, wide ranging and open discussion about how to ensure pensions are secure and affordable and encourage individuals to save for their retirement. However, we do not believe that there is a one size fits all model for pension systems across the EU.

“We fully support creating a robust and sustainable single market for insurance but we do not believe that the new capital solvency requirements should be applied to occupational pensions.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com